UOB said foreign net buying was seen across both debt securities and equity markets.
PETALING JAYA: Malaysia attracted RM14.4bil in foreign portfolio inflows in May, driven by improved investor confidence following signs of easing in the tariff war.
United Overseas Bank (M) Bhd (UOB) said foreign net buying was seen across both debt securities and equity markets.
This brought the year-to-date non-resident portfolio inflows to a four-year high of RM16bil, mainly led by foreign debt inflows totalling RM26.9bil.
This fully offset the cumulative equity outflows of RM10.8bil during the period.
In the debt space, almost all instruments attracted foreign buying interest, except for Malaysia Treasury Bills and private sukuk.
Malaysian Government Securities drew the highest ever monthly non-resident purchases at RM12.5bil in May, while that of Government Investment Issues was the strongest in one and half years.
Meanwhile, private debt securities drew RM800mil in foreign purchases last month.
Moving into the second half of this year, the bank expects “global capital flows to remain bumpy” given the continued uncertainty surrounding tariff, trade and policy responses.
Another factor in play is the looming risks of the US debt ceiling.
“The expiration of a 90-day pause in reciprocal tariffs on July 9 and US debt ceiling extension by mid-July are two key global events to watch out for in the coming month, which will have significant effects on capital flows and currency outlook,” UOB said in a report.
The United States announced the tariffs on April 2. However, on April 9, US President Donald Trump backtracked and said there would be a 90-day pause in the implentation of the tariffs.
The US Federal Reserve is scheduled to meet on June 17 and 18 to review its monetary policy stance while Bank Negara’s Monetary Policy Committee is slated to meet July 8 and 9, which will coincide with the expiration of the 90-day suspension on the reciprocal tariffs by the United States.
UOB noted that Bank Negara’s foreign reserves had risen for the second month in May. Cumulatively, foreign reserves increased by US$3.4bil in the first five months of this year.
According to the bank, the latest reserves position is sufficient to finance five months of imports of goods and services, and is 0.9 times the total short-term external debt.
“The import coverage ratio is comfortably above the generally accepted rule of thumb adequacy threshold of three months,” UOB said.
While Bank Negara has yet to publish its May data, UOB said it expects the central bank’s net short position in foreign exchange swaps narrowed for the third consecutive month by US$1.5bil to a 14-month low of US$25.3bil in April.
This was 21.3% of total foreign reserves.
As investors await clearer global tariff developments in the coming months, UOB said it expects some consolidation in the ringgit.
“Our updated US dollar/ringgit forecasts are 4.32 in the third quarter of this year (3Q25), 4.27 in 4Q25, 4.24 in 1Q26 and 4.20 in 2Q26,” UOB said.
